I read the transcript of the earnings call that is available on seeking alpha a couple of days ago. Though the transcript quality is poor I came away with enough takeaways to be optimistic that the share price is going higher. I didn't take notes but, it is clear that: (1) services side of the business is ramping; (2) they espoused high confidence that the quarter's oil and gas production was impacted by short term factors that already have dissipated; (3) the pay down of high yield debt is significant; (4) their hedges are at good levels; (5) overall tone of the call was as positive and confident as I have seen in many quarters.
Company specific risk is falling fast and now market systemic risk has been eroded with the unexpected "white swan" event in Europe. I probably should add but I'm not planning to at the moment because I'm satisfied with my position adds over the last couple of months and though the macro has improved considerably and Europe is moving in the right direction, agreements there are not unlike a house of cards.
Nice market we're in these days...added y'day at prices I thought I wouldn't see again under $15... so my last purchases at $17.20,$16.20.$15.20 and $14.75 just seem to keep me building my position until something breaks...Either a sale of ERT, or an announcement regarding a Q4000 and contracts to follow.......Either way, this market stinks but I'm patient...I believe my patience will be rewarded regardless of the hostile mkt environment...Company has made it clear to all those that listen that Well intervention is the future.....And with zero debt and $10 cash on the balance sheet after the sale of ERT and possibly some other items, I am looking at a double from here...in 2012
Bought more today at 16-16.20......With the heightened focus on well ops throughout the world and Brazil especially getting very up close and personal with CVX as well RIG,due to that spill, I would not be the least bit surprised to see HLX a beneficiary of this continued focus on responsible drilling...Of course the retainer is one thing in the Gulf but for some reason I believe more opportunity lies in buying a majors well ops business....Growth is on this company's mind? the proof is in the pudding...In the meantime, Oil will average around $94 hedged and unhedged in this last qtr of '11...So EPS for the year will close around $1.50...This stock trading under 11x CURRENT eps is too cheap to ignore...The multiplier effect of tradition in this current environment is all but gone....So patience will make us all some cash but it'll take that for sure
I bought more today and a little y'day around 17.20...With the narrowing spread between WTI and Brent, the issue for me is NOT where to hedge but how much is hedged...Will we have a smoother qtr from a cash flow perspective on E&P? Will we be able to mix and match the dry dock days during '12? I do find it amazing that with the balance sheet in good shape and improving daily, that the equity value isn't in the 20's....I have noticed however a floor underneath the stock...I continue to see slow but steady strength and am looking forward to a newbuild announcement or an acquisition to beef up well ops....Maybe with some luck, we can get the well ops business of a major...Let them do the e&p side....THat would be an interesting swap to boot...PHX for long term well ops work in the deepwater...
“Deep”, “Sweet” & “Bas”: I missed the CEO’s appearance on CNBC. Thanks for your analysis and the info on Kratz’s presentation. Even my missing the show will not keep me from commenting on the subjects that were brought up. I’ll try to boil it down to my brief points as I understand those matters (Well, I’ll try to be brief, ha ha.)
(1) Deepwater E&P is very expensive and failures are killers for independents like HLX. Permitting, equip. availability, design & engineering, etc. moves slower than molasses. However, we have seen leases like Phoenix are real “cash cows”. Remember it was acquired after the two hurricanes in 2005 destroyed the exiting platform and HLX did the remedial work for the lease. In the last full year of production (2004) it averaged 26,000 bbl/day according to MMS records. I think the old owner just took the money and ran. It took until 2010 before HLX achieved any production (HLX built the HP-1 instead of a new platform). The HP-1 was winning idea starting with the BP oil spill, the new well containment service, quicker and cheaper decommissioning, a more movable, reusable production system, etc. etc.
(2) The purchase of Remington in 2005-06, as bad as many on this board lamented over, may have buried HLX with debt, but when we look back, crude prices went from $55/bbl in Nov 2005 to $146/bbl in Jul 2008, over 250% price jump (that’s being smart) before the 2008 financial crash and and a drop to $32/bbl (that’s being dumba$$ unlucky). The production from the several producing well acquired and the new Bushwood production (a REM acq.) came in handy during the lame times from 2008 thru 2011. The tax write-downs of O&G asset allowed during this time along with the positive Cash Flow help HLX survive during a real rough time and even pay down debt to manageable levels. In MHO, the double helix worked.
I’ll have to cut it short (short haaaaaaaaaaaaa). I’m having trouble downloading info now. I plan to continue with more current opinions another day.
I don't buy the hype, and I know a sucker when I see one. The overall tone of the call was as positive and confident because you were tuned into Sesame Street. Just because October was good does not imply November is good. The company can have excellent balance sheets and still take a beating. I suggest you change the channel and watch the real news on CNBC. At the current moment I am invested in SDS and I will continue to hold until hell freezes over.
I couldn't agree with your conclusion more...Given the continued use of capital to reduce the hi yield debt quicker, they speed up increasing shareholder value...they will have enough to not only pay down debt but add a new vessel... Cash earning zero to earning 9.875% pre-tax ( the hi yield note cost) along with a Q4001 says earnings leverage is beginning to show itself...However, given the company's past, most investors are from Missouri...So "Show-me" is the bottom line... When the stock breaks $25 will have more to do with resuming growth than reducing debt...we are on that path as you say.......